Consolidated Financial Results for the Fiscal Year Ended March 31, [JGAAP] May 12, Company Name: DAINICHISEIKA COLOR & CHEMICALS MFG. CO., LTD. Stock Code: 4116 (URL: http://www.daicolor.co.jp/) Stock Exchange Listing: Tokyo Representative: Koji Takahashi, Representative Director and President Contact: Toshiya Sakakibara, Chief Financial Officer Phone: +81-3-3662-7128 Scheduled date of Ordinary General Meeting of Shareholders: June 26, Scheduled date to commence dividend payments: June 29, Scheduled date to submit the Annual Securities Report: June 26, Availability of supplementary briefing material on annual results: None Scheduled date of Annual Results Briefing Session: Not scheduled (Figures are rounded down to the nearest million yen) 1. Consolidated Financial Results for the Fiscal Year Ended March 31, (From April 1, to March 31, ) (1) Consolidated Results of Operations (% indicates changes from the previous corresponding term) Net sales Operating income Ordinary income Net income Millions of yen % Millions of yen % Millions of yen % Millions of yen % 162,999 1.9 9,265 6.7 10,017 6.5 5,662 (5.9) 159,899 8,686 9,404 6,015 (Note) Comprehensive income: : 12,166 million [11.5%] : 10,912 million [ %] Net income per share Ordinary Operating Fully diluted net income Return on equity income income per share to total assets to net sales Yen Yen % % % 60.99 8.1 5.8 5.7 64.79 9.9 6.2 5.4 (Reference) Equity in earnings of affiliated companies: : 225 million : 148 million (Note) Change from the previous corresponding term is omitted for the year ended March 31, because of retrospective revisions due to changes in accounting policies. (2) Consolidated Financial Position (Reference) Equity: Total assets Net assets Equity ratio Net assets per share Millions of yen Millions of yen % Yen 177,458 77,184 42.2 807.57 165,044 66,777 39.3 699.49 : 74,970 million : 64,944 million (3) Consolidated Cash Flows Net cash provided by (used in) operating Net cash provided by Net cash provided by Cash and cash equivalents (used in) investing (used in) financing at end of period activities activities activities Millions of yen Millions of yen Millions of yen Millions of yen 5,673 (2,555) (3,937) 26,181 7,176 (6,243) (3,357) 26,160 (Note) Figures presented above for the year ended March 31, are amounts after the retrospective revisions due to changes in accounting policies.
2. Dividends Annual cash dividends per share Total dividends paid (annual) Payout ratio (consolidated) Dividends to net assets (consolidated) End of 1Q End of 2Q End of 3Q Year-end Annual Yen Yen Yen Yen Yen Millions of yen % % 6.00 6.00 12.00 1,114 18.5 1.8 Year ending March 31, 2016 (Forecast) 7.00 7.00 14.00 19.4 (Note) Figures presented above for the year ended March 31, are amounts after the retrospective revisions due to changes in accounting policies. 6.00 7.00 13.00 1,206 21.3 1.7 3. Forecast of Consolidated Financial Results for Fiscal Year Ending March 31, 2016 (From April 1, to March 31, 2016) (% indicates changes from the previous corresponding term) Net sales Operating income Ordinary income Net income attributable Net income to owners of parent per share Millions of yen % Millions of yen % Millions of yen % Millions of yen % Yen First half 84,000 2.9 5,300 1.9 5,600 1.5 3,600 5.9 38.78 Full year 168,000 3.1 10,000 7.9 10,300 2.8 6,700 18.3 72.17 * Notes (1) Significant changes of subsidiaries during the fiscal year ended March 31, (changes in specific subsidiaries involving changes in the scope of consolidation): Not applicable (2) Changes in accounting policies, changes in accounting estimates and corrections of errors 1) Changes in accounting policies due to the revision of accounting standards, etc.: Applicable 2) Any changes in accounting policies other than 1) above: Applicable 3) Changes in accounting estimates: Not applicable 4) Corrections of errors: Not applicable (Note) For details, please refer to 5. Consolidated Financial Statements (5) Notes to Consolidated Financial Statements (Changes in Accounting Policies) on page 17 of the appendix to this report. (3) Total number of issued shares (common stock) 1) Total number of issued shares at the end of the period (including treasury shares): As of March 31, 93,065,554 shares As of March 31, 93,065,554 shares 2) Total number of treasury shares at the end of the period: As of March 31, 230,902 shares As of March 31, 220,897 shares 3) Average number of shares during the period: Year ended March 31, 92,839,686 shares Year ended March 31, 92,847,646 shares
(Reference) Summary of the Non-consolidated Financial Results Overview of the Non-consolidated Financial and Operating Results for the Fiscal Year Ended March 31, (From April 1,, to March 31, ) (1) Non-consolidated Results of Operations (% indicates changes from the previous corresponding term) Net sales Operating income Ordinary income Net income Millions of yen % Millions of yen % Millions of yen % Millions of yen % 121,163 (1.5) 5,968 2.4 6,540 1.3 4,199 (6.5) 122,968 (2.3) 5,826 17.9 6,456 15.1 4,491 37.4 Net income per share Fully diluted net income per share Yen Yen 45.23 48.37 (2) Non-consolidated Financial Position (Reference) Equity: Total assets Net assets Equity ratio Net assets per share Millions of yen Millions of yen % Yen : 50,243 million : 44,755 million 127,046 50,243 39.5 541.22 119,818 44,755 37.4 482.04 * Presentation regarding the implementation status of the audit procedures: These consolidated financial results for the fiscal year ended March 31, are not covered by the audit procedure stipulated in the Financial Instruments and Exchange Act. At the time of the publication of these financial results, the audit procedure for consolidated financial statements is being implemented. * Explanation for the appropriate use of performance forecasts and other special notes: The statements regarding forecast of financial results in this report are based on the information that is available, as well as estimates, assumptions and projections that are believed to be reasonable at the time of publication, and they are not meant to be a commitment by the Company. Therefore, there might be cases in which actual results differ from forecast values. For the forecast of financial results, please refer to 1. Analyses of Results of Operations and Financial Position (1) Analysis of Results of Operations on page 2 to 3 of the appendix to this report.
Table of Contents of Appendix 1. Analyses of Results of Operations and Financial Position 2 (1) Analysis of Results of Operations 2 (2) Analysis of Financial Position 3 (3) Principles of Appropriation of Profits and Dividend Payment for the Current Fiscal Year and the Next 4 2. Status of the Consolidated Group 5 3. Management Policy 6 (1) Basic Management Policy of the Company 6 (2) Targeted Management Benchmark 6 4. Basic approach in choosing accounting standard 6 5. Consolidated Financial Statements 7 (1) Consolidated Balance Sheets 7 (2) Consolidated Statements of Income and Comprehensive Income 9 Consolidated Statements of Income 9 Consolidated Statements of Comprehensive Income 11 (3) Consolidated Statements of Changes in Net Assets 12 (4) Consolidated Statements of Cash Flows 14 (5) Notes to Consolidated Financial Statements 16 (Notes to Going Concern Assumption) 16 (Significant Matters Providing the Basis for Preparing Consolidated Financial Statements) 16 (Changes in Accounting Policies) 17 (Notes to Consolidated Statements of Income) 17 (Notes to Consolidated Statements of Changes in Net Assets) 19 (Notes to Consolidated Statements of Cash Flows) 20 (Segment Information, etc.) 21 (Per Share Information) 24 (Significant Subsequent Events) 24 6. Other 25 Changes in Directors and Corporate Auditors 25 1
1. Analyses of Results of Operations and Financial Position (1) Analysis of Results of Operations During the fiscal year ended March 31,, the Japanese economy maintained a slow but moderate recovery trend, sustained by continuing lower oil price and depreciation of the yen, despite the impact of reaction following the spike in demand ahead of the consumption tax hike and bad weather in summer. Overseas economies were mixed, as the U.S. economy continued its modest recovery trend, while the Asian economy was weak with such factors as a slowdown in China s economic growth. European economy remained sluggish. In such an economic environment, net sales for the fiscal year ended March 31, increased to 162,999 million up by 1.9% compared with the previous fiscal year. In terms of profits, operating income was 9,265 million up by 6.7% compared with the previous fiscal year due to expansion of sales of higher value-added products, despite the influence of remaining high prices of raw materials. Ordinary income amounted to 10,017 million, up by 6.5% compared with the previous fiscal year. On the other hand, net income was 5,662 million down by 5.9% compared with the previous fiscal year. It is mainly due to extraordinary loss recorded as provision for the loss from liquidation of a consolidated subsidiary in China during the fiscal year ended March 31, which is the Company s response to changes in the structure of demand. Operating results by business segment are as follows: The stated amount of operating income is before the reduction of corporate allocation. (Pigments business) In the Pigments business, the Group manufactures and sells various inorganic-organic pigments, various colorants, and information-recording materials. Sales of pigments for color filters and toner of information-recording materials continued strong while pigments for the paint industry were sluggish. As a result, although net sales in the segment stood at 24,162 million, up by 1.7% compared with the previous fiscal year, operating income was 3,743 million, down by 2.1% compared with the previous fiscal year. (Prepared colors and Chemicals business) In the Prepared colors and Chemicals business, the Group manufactures and sells various colorants used in synthetic resins, various compounds and various coating materials. As for sales to the automobile industry, overseas sales continued strong while domestic sales dropped as a reaction to the rush in demand ahead of the consumption tax hike. Sales of coating materials to information and electronics industries expanded for use in production of LCD televisions and smartphones. As a result, net sales in the segment stood at 89,949 million, up by 3.4% compared with the previous fiscal year, while operating income was 4,469 million, up by 8.1% compared with the previous fiscal year. (Polymers business) In the Polymers business, the Group manufactures and sells polymer products and natural polymer products. Sales of materials for interior products for the automobile industry expanded backed by strong demand in the North America and brisk sales of vehicle models that use the Company s products. Sales of special coating agents of information-recording materials continued strong overall especially in U.S. As a result, net sales in the segment stood at 17,773 million, down by 0.5% compared with the previous fiscal year, while operating income was 3,068 million, up by 2.1% compared with the previous fiscal year. (Printing Inks business) In the Printing Inks business, the Group manufactures and sells various printing inks and also offers merchandise and services associated with the business. As for gravure printing ink for the packaging industry, it remained robust for food-related use although sales for beverage-related use was decreased negatively impacted by the bad weather in summer. In Southeast Asia market, sales continued to be brisk especially in 2
products of lifestyle-related and food-related. On the other hand, sales of offset printing ink for book publishing industry dropped sharply due to a decrease in demand. As a result, net sales in the segment stood at 29,492 million, down by 1.7% compared with the previous fiscal year, while operating income was 2,465 million, up by 3.3% compared with the previous fiscal year. (Other business) In the Other business, the Group engages in leasing of real estate properties and financial business for group companies, and others. Net sales in this segment stood at 1,621 million, up by 28.8% compared with the previous fiscal year, while operating income was 135 million. Consolidated financial results for the fiscal year ending March 31, 2016 are forecasted as follows: Net income attributable to Net sales Operating income Ordinary income owners of parent 168,000 10,000 10,300 6,700 (2) Analysis of Financial Position (i) Assets, Liabilities and Net Assets (Assets) Total assets as at the end of the fiscal year ended March 31, increased by 12,413 million compared with the end of the previous fiscal year to 177,458 million. This is largely because of an increase in inventories, increase in unrealized gains on investment securities due to rise of stock markets and increase in net defined benefit asset thanks to strong management performance of pension assets. (Liabilities) Total liabilities as at the end of the fiscal year ended March 31, increased by 2,006 million compared with the end of the previous fiscal year to 100,273 million. This is largely because of an increase in Deferred tax liabilities. (Net assets) Net assets as at the end of the fiscal year ended March 31, increased by 10,406 million compared with the end of the previous fiscal year to 77,184 million. This is largely because of an increase in retained earnings thanks to the recognition of net income for the year, as well as an increase in foreign currency translation adjustment resulting from a depreciation of yen and a rise in valuation difference on available-for-sale securities driven by an increase in unrealized gains on investment securities. (ii) Cash Flows In the fiscal year ended March 31,, cash and cash equivalents (hereinafter referred to as net cash ) at the end of the current fiscal year increased by 21 million (or 0.1%) compared with the end of the previous fiscal year to 26,181 million. Net cash provided by (used in) respective activities during the fiscal year ended March 31, are as follows: (Net cash provided by (used in) operating activities) Net cash provided by operating activities decreased by 1,503 million (or 20.9%) compared with the previous fiscal year to 5,673 million, This is largely because of an increase in inventories, which were partially offset by the recognition of income before income taxes and minority interests of 9,087 million. (Net cash provided by (used in) investing activities) Net cash used in investing activities decreased by 3,687 million (or 59.1%) compared with the previous fiscal year to 2,555 million. This was mainly because of disposal of idle assets, which was partially offset by 3
spending in capital investment of 4,336 million. (Net cash provided by (used in) financing activities) Net cash used in financing activities increased by 580 million (or 17.3%) compared with the previous fiscal year to 3,937 million. This is largely because of 1,114 million payment for cash dividends and continued effort to progressively repay loans payable. (Reference) Transition of cash flow-related ratios Year ended March 31, 2011 Year ended March 31, 2012 Year ended March 31, 2013 Year ended March 31, Year ended March 31, Equity ratio (%) 31.2 32.3 35.7 39.3 42.2 Equity ratio on a market value basis (%) 25.1 23.6 25.9 26.9 32.3 Cash flows/ interest-bearing debt 6.2 7.1 5.9 7.7 8.8 ratio (years) Interest coverage ratio (times) 10.4 9.7 13.5 10.9 9.3 Equity ratio: Equity / Total assets Equity ratio on a market value basis: Market capitalization / Total assets Cash flows / interest-bearing debt ratio: Interest-bearing debt / Cash flows Interest coverage ratio: Cash flows / Interest payment Note 1: All ratios are calculated based on the consolidated financial data. Note 2: Market capitalization is calculated based on the number of shares issued excluding treasury shares. Note 3: Net cash provided by operating activities is quoted as cash flow here. Note 4: Interest-bearing debt refers to all debts involving interest payment, of all the debts recorded on the consolidated balance sheets. Note 5: Since Change in the Method for Translating the Income and Expenses of Overseas Subsidiaries into Japanese Yen has been applied from the fiscal year ended March 31,, stated figures for the fiscal year ended March 31, are after the retrospective application. (3) Principles of Appropriation of Profits and Dividend Payment for the Current Fiscal Year and the Next The Company makes it a principle to pursue dividend policy in which the return of profits to shareholders is regarded as an important management priority, yet with broader consideration to the reinforcement of its operation basis through building up of internal reserves, for the business development in future. Dividend payment at the end of the fiscal year ended March 31, will be revised to 7.00 per share, an increase of 1.00 based on the above mentioned principle and forecast of financial results for the next fiscal year ending March 31, 2016. As a result, the annual dividend for the fiscal year ended March 31, will be the sum of the year-end dividend of 7.00 per share and an interim dividend of 6.00 per share, which will result in 13.00 per share. Dividend for the next fiscal year ending March 31, 2016 will be the sum of 7.00 per share for an interim dividend, and 7.00 per share for a year-end dividend, amounting to 14.00 per share on an annual basis. 4
2. Status of the Consolidated Group The Group (the Company and its subsidiaries and affiliates) comprises the Company (Dainichiseika Color & Chemicals Mfg. Co., Ltd.) and its 42 subsidiaries and affiliates. The Company has consolidated 27 of its principal subsidiaries. Of the unconsolidated 6 subsidiaries and 9 affiliates, 3 are subject to equity method. From the fiscal year ended March 31,, DAINICHI COLOR INDIA PRIVATE LTD., DAICOLOR DO BRASIL IND.E COM.LTDA., and DAINICHI PLABOARD CO., LTD. have been included in the scope of consolidation as their importance increased. The Group s principal businesses and the relationships of the Group companies to each business are as follows. (Pigments business) In the Pigments business, the Group manufactures and sells various inorganic-organic pigments, various colorants, and information-recording materials. The Company and its consolidated subsidiary, DAICOLOR ITALY S.R.L., are principally engaged in manufacturing and distribution of these products. The Company and its subsidiaries and affiliates have transactions in selling and buying products and raw materials between one another. (Prepared colors and Chemicals business) In the Prepared colors and Chemicals business, the Group manufactures and sells various colorants used in synthetic resins, various compounds and various coating materials. The Company and its consolidated subsidiaries including DAINICHISEIKA (HK) COLOURING CO., LTD., and DAINICHI COLOR (THAILAND), LTD. are principally engaged in manufacturing and distribution of these products. The Company and its subsidiaries and affiliates have transactions in selling and buying products and raw materials between one another. (Polymers business) In the Polymers business, the Group manufactures and sells polymer products and natural polymer products. The Company and its consolidated subsidiary, UKIMA COLOR & CHEMICALS MFG. CO., LTD., are principally engaged in manufacturing and sales of these products. The Company and its subsidiaries and affiliates have transactions in selling and buying products and raw materials between one another. (Printing Inks business) In the Printing Inks business, the Group manufactures and sells various printing inks and also offers merchandise and services associated with the business. The Company and its consolidated subsidiary, P.T.HI-TECH INK INDONESIA, are principally engaged in manufacturing and sales of these products. The Company and its subsidiaries and affiliates have transactions in selling and buying products and raw materials between one another. (Other business) In the Other business, the Group engages in resale of products, etc., leasing of real estate properties and financial businesses for group companies, and others. The Company and its consolidated subsidiary, DSF CO., LTD., are principally engaged in these businesses. 5
3. Management Policy (1) Basic Management Policy of the Company Richness in our daily lives goes together with colorful environment. DAINICHISEIKA COLOR & CHEMICALS MFG. CO., LTD., a comprehensive high-tech manufacturer of color materials, and its 42 subsidiaries and affiliates comprise the Group. Most of the Group companies provide colors using sophisticated fine chemical technologies, thus fulfills our corporate philosophy that we contribute to the creation of a beautiful color environment of the earth community. As chemical manufacturers, we take environmental issue seriously by developing systematic approaches to manage environment, along with the responsible attitude paying due attention and consideration to health, safety and environment. Furthermore, we endeavor to develop global business as an environment-conscious excellent company of the 21st century, providing sponsorship to various color-creating activities as part of our corporate philanthropy. Our basic business policies are as follows: (i) Activities to create demand for various colors by marketing effort closely integrating sales and engineering functions within the Group (ii) Development of original products capitalizing on the Group s sophisticated technologies that have been developed over many years in the areas of pigment synthesis, organic synthesis, special resin synthesis, creation of functional substance, along with technologies for fine particles dispersion (iii) Further development of overseas businesses to keep up with the globalized market (2) Targeted Management Benchmark 5% or higher consolidated ROA (return on asset) is targeted as the principal management objective of the Group, by way of efficient investment of assets, enhancement of earning power, as well as improvement and reinforcement of financial position. 4. Basic approach in choosing accounting standard The Group applies Japanese GAAP for the present with consideration given to comparability of consolidated financial statements among periods and companies. The Group will deliberate on whether to apply International Financial Reporting Standards (IFRS) considering such factors as moves of IFRS application in Japan. 6
5. Consolidated Financial Statements (1) Consolidated Balance Sheets As of March 31, As of March 31, Assets Current assets Cash and deposits 27,215 26,694 Notes and accounts receivable - trade 46,171 47,840 Securities 182 - Merchandise and finished goods 15,425 17,385 Work in process 304 259 Raw materials and supplies 7,706 8,494 Deferred tax assets 1,476 1,459 Other 1,004 1,343 Allowance for doubtful accounts (99) (77) Total current assets 99,387 103,400 Non-current assets Property, plant and equipment Buildings and structures 38,129 40,178 Accumulated depreciation (24,993) (26,546) Buildings and structures, net 13,136 13,631 Machinery, equipment and vehicles 48,564 51,618 Accumulated depreciation (41,274) (43,925) Machinery, equipment and vehicles, net 7,290 7,693 Tools, furniture and fixtures 9,452 9,790 Accumulated depreciation (8,477) (8,787) Tools, furniture and fixtures, net 975 1,003 Land 19,915 19,050 Leased assets 1,681 1,751 Accumulated depreciation (726) (923) Leased assets, net 955 828 Construction in progress 647 2,539 Total property, plant and equipment 42,920 44,746 Intangible assets Other 1,182 1,325 Total intangible assets 1,182 1,325 Investments and other assets Investment securities 15,567 19,735 Investments in capital 1,240 494 Deferred tax assets 769 357 Net defined benefit asset 2,115 5,397 Other 2,123 2,108 Allowance for doubtful accounts (262) (106) Total investments and other assets 21,553 27,985 Total non-current assets 65,656 74,057 Total assets 165,044 177,458 7
Liabilities Current liabilities As of March 31, As of March 31, Notes and accounts payable - trade 27,616 27,108 Short-term loans payable 20,829 19,188 Current portion of long-term loans payable 9,647 9,914 Lease obligations 318 323 Income taxes payable 1,040 1,391 Provision for bonuses 2,112 2,133 Provision for environmental measures 194 181 Provision for disposal costs of property 198 - Other 3,816 4,864 Total current liabilities 65,773 65,104 Non-current liabilities Long-term loans payable 21,525 21,349 Lease obligations 1,047 847 Deferred tax liabilities 374 2,375 Provision for directors retirement benefits 416 372 Provision for loss on liquidation of subsidiaries and associates 165 539 Provision for environmental measures 550 461 Net defined benefit liability 7,942 8,730 Other 469 493 Total non-current liabilities 32,493 35,169 Total liabilities 98,266 100,273 Net assets Shareholders equity Capital stock 10,039 10,039 Capital surplus 9,193 9,193 Retained earnings 43,573 48,097 Treasury shares (93) (99) Total shareholders equity 62,713 67,231 Accumulated other comprehensive income Valuation difference on available-for-sale securities 3,107 6,188 Deferred gains or losses on hedges (16) (14) Foreign currency translation adjustment (156) 1,376 Remeasurements of defined benefit plans (704) 188 Total accumulated other comprehensive income 2,230 7,739 Minority interests 1,833 2,213 Total net assets 66,777 77,184 Total liabilities and net assets 165,044 177,458 8
(2) Consolidated Statements of Income and Comprehensive Income (Consolidated Statements of Income) Previous fiscal year (From April 1, 2013 to March 31, ) Current fiscal year (From April 1, to March 31, ) Net sales 159,899 162,999 Cost of sales 134,547 136,796 Gross profit 25,352 26,202 Selling, general and administrative expenses Haulage expenses 2,626 2,631 Provision of allowance for doubtful accounts 10 10 Salaries and allowances 5,328 5,521 Provision for bonuses 618 644 Provision for directors retirement benefits 3 1 Retirement benefit expenses 701 623 Other 7,376 7,505 Total selling, general and administrative expenses 16,666 16,937 Operating income 8,686 9,265 Non-operating income Interest income 60 76 Dividend income 212 235 Rent income on non-current assets 143 149 Foreign exchange gains 335 283 Share of profit of entities accounted for using equity method 148 225 Dividend income of insurance 182 167 Other 484 395 Total non-operating income 1,568 1,534 Non-operating expenses Interest expenses 666 639 Rent expenses on non-current assets 9 26 Loss on sales of notes payable 28 21 Other 145 94 Total non-operating expenses 850 781 Ordinary income 9,404 10,017 Extraordinary income Gain on sales of non-current assets 62 493 Gain on sales of investments in capital of subsidiaries and associates - 75 Subsidy income 52 - Gain on bargain purchase 136 - Other 139 79 Total extraordinary income 391 648 9
Extraordinary losses Previous fiscal year (From April 1, 2013 to March 31, ) Current fiscal year (From April 1, to March 31, ) Loss on sales of non-current assets 58 181 Loss on retirement of non-current assets 473 143 Impairment loss 64 25 Loss on liquidation of subsidiaries and associates - *1 394 Provision for loss on liquidation of subsidiaries and associates - *2 539 Loss on disaster - *3 33 Environmental expenses 223 235 Provision for disposal costs of property *4 195 - Other 121 25 Total extraordinary losses 1,136 1,579 Income before income taxes and minority interests 8,658 9,087 Income taxes - current 1,891 2,534 Income taxes - deferred 601 771 Total income taxes 2,493 3,306 Income before minority interests 6,165 5,781 Minority interests in income 149 118 Net income 6,015 5,662 10
(Consolidated Statements of Comprehensive Income) Previous fiscal year (From April 1, 2013 to March 31, ) Current fiscal year (From April 1, to March 31, ) Income before minority interests 6,165 5,781 Other comprehensive income Valuation difference on available-for-sale securities 1,554 3,102 Deferred gains or losses on hedges (0) 1 Foreign currency translation adjustment 2,865 2,238 Remeasurements of defined benefit plans, net of tax - 897 Share of other comprehensive income of entities accounted for using equity method 326 145 Total other comprehensive income 4,747 6,385 Comprehensive income 10,912 12,166 Comprehensive income attributable to Comprehensive income attributable to owners of parent 10,458 11,825 Comprehensive income attributable to minority interests 454 341 11
(3) Consolidated Statements of Changes in Net Assets Previous fiscal year (From April 1, 2013 to March 31, ) Balance at beginning of current period Cumulative effects of changes in accounting policies Shareholders equity Capital stock Capital surplus Retained earnings Treasury shares Total shareholders equity 10,039 9,193 39,255 (91) 58,397 (769) (769) Restated balance 10,039 9,193 38,486 (91) 57,628 Changes of items during period Dividends of surplus (1,114) (1,114) Net income 6,015 6,015 Purchase of treasury shares Change of scope of consolidation (2) (2) 140 140 Increase by merger 45 45 Net changes of items other than shareholders equity Total changes of items during period Balance at end of current period 5,087 (2) 5,085 10,039 9,193 43,573 (93) 62,713 Balance at beginning of current period Cumulative effects of changes in accounting policies Valuation difference on availablefor-sale securities Accumulated other comprehensive income Deferred gains or losses on hedges Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensi ve income Minority interests Total net assets 1,569 (16) (3,829) (2,276) 1,833 57,954 769 769 Restated balance 1,569 (16) (3,060) (1,507) 1,833 57,954 Changes of items during period Dividends of surplus (1,114) Net income 6,015 Purchase of treasury shares Change of scope of consolidation (2) 140 Increase by merger 45 Net changes of items other than shareholders equity Total changes of items during period Balance at end of current period 1,538 (0) 2,904 (704) 3,738 (0) 3,738 1,538 (0) 2,904 (704) 3,738 (0) 8,823 3,107 (16) (156) (704) 2,230 1,833 66,777 12
Current fiscal year (From April 1, to March 31, ) Balance at beginning of current period Cumulative effects of changes in accounting policies Shareholders equity Capital stock Capital surplus Retained earnings Treasury shares Total shareholders equity 10,039 9,193 43,573 (93) 62,713 34 34 Restated balance 10,039 9,193 43,608 (93) 62,748 Changes of items during period Dividends of surplus (1,114) (1,114) Net income 5,662 5,662 Purchase of treasury shares Change of scope of consolidation Net changes of items other than shareholders equity Total changes of items during period Balance at end of current period (5) (5) (60) (60) 4,488 (5) 4,482 10,039 9,193 48,097 (99) 67,231 Balance at beginning of current period Cumulative effects of changes in accounting policies Valuation difference on availablefor-sale securities Accumulated other comprehensive income Deferred gains or losses on hedges Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensi ve income Minority interests Total net assets 3,107 (16) (156) (704) 2,230 1,833 66,777 (0) 34 Restated balance 3,107 (16) (156) (704) 2,230 1,833 66,812 Changes of items during period Dividends of surplus (1,114) Net income 5,662 Purchase of treasury shares Change of scope of consolidation Net changes of items other than shareholders equity Total changes of items during period Balance at end of current period (5) (654) (654) 79 (634) 3,080 1 2,187 893 6,163 301 6,464 3,080 1 1,532 893 5,508 380 10,372 6,188 (14) 1,376 188 7,739 2,213 77,184 13
(4) Consolidated Statements of Cash Flows Previous fiscal year (From April 1, 2013 to March 31, ) Current fiscal year (From April 1, to March 31, ) Cash flows from operating activities Income before income taxes and minority interests 8,658 9,087 Depreciation 3,875 3,626 Impairment loss 64 25 Increase (decrease) in provision for directors retirement benefits (28) (43) Increase (decrease) in provision for bonuses 75 12 Increase (decrease) in allowance for doubtful accounts 92 (279) Increase(decrease) in net defined benefit liability (1,905) (1,692) Interest and dividend income (272) (312) Interest expenses 666 639 Foreign exchange losses (gains) 8 58 Share of (profit) loss of entities accounted for using equity method (148) (225) Proceeds from dividend income from entities accounted for using equity method 41 69 Loss (gain) on valuation of investment securities 1 - Loss (gain) on sales of property, plant and equipment (4) (311) Loss on retirement of property, plant and equipment 473 143 Decrease (increase) in notes and accounts receivable - trade (815) (182) Decrease (increase) in inventories 848 (1,353) Increase (decrease) in notes and accounts payable - trade (2,057) (2,110) Other, net 416 902 Subtotal 9,989 8,052 Interest and dividend income received 272 312 Interest expenses paid (659) (638) Income taxes paid (2,426) (2,053) Net cash provided by (used in) operating activities 7,176 5,673 Cash flows from investing activities Payments into time deposits (1,055) (513) Proceeds from withdrawal of time deposits 153 1,055 Purchase of securities (3) - Proceeds from sales of securities - 187 Purchase of property, plant and equipment (4,058) (4,336) Proceeds from sales of property, plant and equipment 298 1,418 Purchase of investment securities (697) (358) Proceeds from sales of investment securities 17 69 Purchase of shares of subsidiaries (304) - Payments of loans receivable (46) (19) Collection of loans receivable 53 49 Other, net (600) (108) Net cash provided by (used in) investing activities (6,243) (2,555) 14
Cash flows from financing activities Previous fiscal year (From April 1, 2013 to March 31, ) Current fiscal year (From April 1, to March 31, ) Increase in short-term loans payable 14,666 10,317 Decrease in short-term loans payable (17,169) (12,419) Proceeds from long-term loans payable 9,010 7,880 Repayments of long-term loans payable (8,259) (8,142) Repayments of lease obligations (452) (409) Purchase of treasury shares (2) (5) Cash dividends paid (1,114) (1,114) Cash dividends paid to minority shareholders (34) (45) Net cash provided by (used in) financing activities (3,357) (3,937) Effect of exchange rate change on cash and cash equivalents 874 735 Net increase (decrease) in cash and cash equivalents (1,549) (84) Cash and cash equivalents at beginning of period 27,506 26,160 Increase in cash and cash equivalents from newly consolidated subsidiary 203 106 Cash and cash equivalents at end of period *1 26,160 *1 26,181 15
(5) Notes to Consolidated Financial Statements (Notes to Going Concern Assumption) Not applicable. (Significant Matters Providing the Basis for Preparing Consolidated Financial Statements) 1. Scope of consolidation Number of consolidated subsidiaries: 27 companies From the fiscal year ended March 31,, DAINICHI COLOR INDIA PRIVATE LTD., DAICOLOR DO BRASIL IND.E COM.LTDA., and DAINICHI PLABOARD CO., LTD. have been included in the scope of consolidation as their importance increased. 2. Accounting standards (1) Accounting standards for significant allowances and provisions (i) Provision for disposal costs of property The Company provides for expenditures associated with demolition of buildings, etc. based on the amount reasonably estimated for such demolition expenses. (ii) Provision for loss on liquidation of subsidiaries and associates The Company provides for losses associated with liquidation of subsidiaries and affiliates based on the estimated amount attributable to the Company as of the end of the fiscal year ended March 31,. (2) Accounting policies for retirement benefits (i) Method of attributing estimated retirement benefits to periods of service In calculating retirement benefit obligations, the Company attributes estimated retirement benefits to the periods concluding at the end of the fiscal year ended March 31,, using the benefit formula method. (ii) Accounting policies for actuarial gains or losses and prior service costs Actuarial gains or losses are amortized pro rata using the straight-line method commencing from the fiscal year following the fiscal year in which these gains or losses occurred, over the certain amount of periods (14 years) that are within the average remaining service years of employees at the time of the occurrence. Prior service costs are charged to expenses, using the straight-line method, over the certain amount of periods (10 years) that are within the average remaining service years of the employees at the time of the occurrence of those costs. (iii) Accounting procedure for unrecognized net actuarial gains or losses and unrecognized prior service costs Unrecognized net actuarial gains or losses and unrecognized prior service costs are reported as remeasurements of defined benefit plans under accumulated other comprehensive income within net assets, after adjusted for tax effects. 16
(Changes in Accounting Policies) (Adoption of Accounting Standard for Retirement Benefits) Effective from the current consolidated fiscal year, the Company has adopted the provisions of Paragraph 35 of the Accounting Standard for Retirement Benefits (Accounting Standards Board of Japan (ASBJ) Statement No. 26, May 17, 2012; the Accounting Standard ) and Paragraph 67 the Guidance on Accounting Standard for Retirement Benefits (ASBJ Guidance No. 25, March 26, ; the Guidance ). With this application, the calculation methods for retirement benefit obligations and service cost have been changed, the method of allocating expenses for projected benefit obligation to periods has been changed from straight-line method to the benefit formula method. In addition, the method of determining the discount rate applied in the calculation of projected benefit obligation was changed from the method using the number of years approximate to the average remaining service period of employees to the method using the single weighted average discount rate that reflects the estimated period and amount of benefit payment in each period. In accordance with the transitional treatment prescribed in Paragraph 37 of the Accounting Standard, the Company applied the Accounting Standard at the beginning of fiscal year ended March 31,, and the effect of the accounting change in retirement benefit obligations and service cost was reflected in retained earnings. As a result, net defined benefit asset increased by 316 million, net defined benefit liability increased by 262 million and retained earnings increased by 34 million at the beginning of the current fiscal year. The impact of this change on consolidated operating income, ordinary income, income before income taxes and minority interests, and per share information for the fiscal year ended March 31, is immaterial. (Change in the Method for Translating the Income and Expenses of Overseas Subsidiaries into Japanese Yen) Previously, the Company translated the income and expenses of overseas subsidiaries into yen at the spot exchange rates in effect as of the balance sheet date, but it switched to translating income and expenses into yen at the average exchange rate during the period from the consolidated fiscal year ended March 31,. This change was made because the Group has been promoting an increase in overseas sales and global expansion, so the Company determined that translating the income and expenses of overseas subsidiaries into yen at the average exchange rate during the period is logical in order to show the profit of overseas subsidiaries for the period properly amidst an anticipated increase in the materiality of the overseas subsidiaries in the future. This change in accounting policy has been applied retrospectively, and the consolidated financial statements for the previous fiscal year are stated following retrospective application. As a result, net sales decreased by 2,179 million, operating income decreased by 184 million, ordinary income decreased by 39 million and income before income taxes and minority interests decreased by 41 million in the previous fiscal year compared with before the retrospective application. In addition, as the cumulative effect was reflected in consolidated net assets at the beginning of the previous fiscal year, the balance at the beginning of the period for the previous fiscal year decreased by 769 million for retained earnings while foreign currency translation adjustment increased by the same amount. Impacts on the per share information are stated in the relevant part of this report. (Notes to Consolidated Statements of Income) *1 Loss on liquidation of subsidiaries and associates Current fiscal year (From April 1, to March 31, ) This refers to losses associated with liquidation of subsidiaries and associates. *2 Provision for loss on liquidation of subsidiaries and associates Current fiscal year (From April 1, to March 31, ) 17
This is recorded based on the estimated amount incurred to the Company to prepare for losses associated with liquidation of subsidiaries and affiliates. *3 Loss on disaster Current fiscal year (From April 1, to March 31, ) This refers to losses on retirement of inventories and such due to the damages caused by storm which occurred in Thailand. *4 Provision for disposal costs of property Previous fiscal year (From April 1, 2013 to March 31, ) This is recorded based on the amount reasonably estimated for demolition expenses to prepare for expenditure for the demolition of buildings, etc. 18
(Notes to Consolidated Statements of Changes in Net Assets) Previous fiscal year (From April 1, 2013 to March 31, ) 1. Class and total number of issued shares and class and number of treasury shares Number of shares at the beginning of the current fiscal year (1,000 shares) Increased number of shares during the current fiscal year (1,000 shares) Decreased number of shares during the current fiscal year (1,000 shares) Number of shares at the end of the current fiscal year (1,000 shares) Number of issued shares Common stock 93,065 93,065 Total 93,065 93,065 Treasury shares Common stock (Note) 215 5 220 Total 215 5 220 Note: Increase of 5 thousand shares in treasury shares of common stock is due to the purchase of shares of less than one unit. 2. Dividends (1) Dividend payment amount (Resolution) Ordinary General Meeting of Shareholders held on June 27, 2013 Board of Directors meeting held on November 7, 2013 Class of shares Total dividend amount Dividends per share (yen) Record date Effective date Common stock 557 6.0 March 31, 2013 June 28, 2013 Common stock 557 6.0 September 30, 2013 December 5, 2013 (2) Of the dividends whose record date belongs to the current fiscal year, those whose effective date will be in the next fiscal year (Resolution) Ordinary General Meeting of Shareholders to be held on June 27, Class of shares Common stock Total dividend amount 557 Source of dividends Retained earnings Dividends per share (yen) 6.0 Record date March 31, Effective date June 30, Current fiscal year (From April 1, to March 31, ) 1. Class and total number of issued shares and class and number of treasury shares Number of shares at the beginning of the current fiscal year (1,000 shares) Increased number of shares during the current fiscal year (1,000 shares) Decreased number of shares during the current fiscal year (1,000 shares) Number of shares at the end of the current fiscal year (1,000 shares) Number of issued shares Common stock 93,065 93,065 Total 93,065 93,065 Treasury shares Common stock (Note) 220 10 230 Total 220 10 230 Note: Increase of 10 thousand shares in treasury shares of common stock is due to the purchase of shares of less than one unit. 19
2. Dividends (1) Dividend payment amount (Resolution) Ordinary General Meeting of Shareholders held on June 27, Board of Directors meeting held on November 11, Class of shares Total dividend amount Dividends per share (yen) Record date Effective date Common stock 557 6.0 March 31, June 30, Common stock 557 6.0 September 30, December 5, (2) Of the dividends whose record date belongs to the current fiscal year, those whose effective date will be in the next fiscal year (Resolution) Ordinary General Meeting of Shareholders to be held on June 26, Class of shares Common stock Total dividend amount 649 Source of dividends Retained earnings Dividends per share (yen) 7.0 Record date March 31, Effective date June 29, (Notes to Consolidated Statements of Cash Flows) *1. Relationship between the balance of cash and cash equivalents at the end of the fiscal year and items stated in the consolidated balance sheets Previous fiscal year Current fiscal year (From April 1, 2013 to March 31, ) (From April 1, to March 31, ) Cash and deposits 27,215 26,694 Time deposits with maturities of more than three months (1,055) (513) Cash and cash equivalents 26,160 26,181 20
(Segment Information, etc.) [Segment Information] 1. Outline of reportable segments Reportable segments of the Group are the organizational units for which separated financial information is available, and the operating results of each segment are regularly reviewed by the Board of Directors to make decisions on management resources to be allocated to and evaluate financial performance. As a comprehensive high-tech and color science manufacturer, the Group deals in manufacturing and sales of various products related to coloring inside and outside of Japan, as well as conducting business related to coloring. For this reason, the Group has listed five reportable segments by product types, namely Pigments business, Prepared colors and Chemicals business, Polymers business, Printing Inks business, and Other business. Main Products/Services in each reportable segment Reportable segment Main Products/Services Pigments business Inorganic-organic pigments, various colorants, and information-recording materials Prepared colors and Chemicals business Polymers business Printing Inks business Other business Various colorants used in synthetic resins, various compounds and various coating materials Polymer products and natural polymer products Various printing inks and merchandise and services associated with the business Leasing of real estate properties and financial businesses for group companies, others 2. The calculating method regarding sales, operating income or loss, assets, liabilities and other items by the reportable segments For accounting treatment for reported business segments, a similar method described in Significant Matters Providing the Basis for Preparing Consolidated Financial Statements is used. Income of reportable segments is the amount based on operating income. Intersegment net sales and transfer are based on prevailing market prices. 21
3. Information regarding sales, operating income or loss, assets, liabilities and other items by the reportable segments Previous consolidated fiscal year (April 1, 2013 to March 31, ) Net sales Pigments business Prepared colors and Chemicals business Reportable segments Polymers business Printing Inks business Other business (Note 1) Total Adjusted amount (Notes 2, 3) Posted amount to the consolidated financial statements (1) Net sales to external customers 23,749 87,016 17,858 30,015 1,259 159,899-159,899 (2) Intersegment net sales and transfer 424 26 68 45 15,354 15,920 (15,920) - Total 24,174 87,042 17,927 30,061 16,613 175,819 (15,920) 159,899 Segment income [Operating income] (loss) 3,821 4,133 3,005 2,387 (120) 13,228 (4,542) 8,686 Segment assets (Property, plant and 6,884 15,492 9,117 4,448 1,328 37,271 5,649 42,920 equipment) Other items Increased amount in property, plant and equipment 1,198 1,715 210 337 0 3,462 609 4,071 Notes: 1. Operating loss is reported in Other business, as it includes the loss from the company which provides services such as property management and financial businesses for the Group in the other business. The revenue associated with Other business is reported as non-operating income, and operating expenses are not allocated to each reportable segment. 2. The adjusted amount of segment income includes corporate expenses of 4,542 million not allocated to each reportable segment. Corporate expenses refer to the expenses at the head office organizations, such as general affairs and accounting divisions that do not belong to those reportable segments, as well as research and development expenses. 3. The adjusted amount of segment assets (property, plant and equipment) includes corporate assets of 5,649 million not allocated to each reportable segment. Corporate assets refer to the assets at the head office organizations, such as general affairs and accounting divisions that do not belong to those reportable segments, as well as some welfare facilities. 22
Current consolidated fiscal year (April 1, to March 31, ) Net sales Pigments business Prepared colors and Chemicals business Reportable segments Polymers business Printing Inks business Other business Total Adjusted amount (Notes 1, 2) Posted amount to the consolidated financial statements (1) Net sales to external customers 24,162 89,949 17,773 29,492 1,621 162,999-162,999 (2) Intersegment net sales and transfer 506 32 99 0 16,084 16,723 (16,723) - Total 24,668 89,982 17,872 29,493 17,705 179,722 (16,723) 162,999 Segment income [Operating income] 3,743 4,469 3,068 2,465 135 13,883 (4,617) 9,265 Segment assets (Property, plant and 6,892 15,919 9,767 4,496 1,329 38,406 6,340 44,746 equipment) Other items Increased amount in property, plant and equipment 950 1,323 773 514 7 3,570 1,341 4,911 Notes: 1. The adjusted amount of segment income includes corporate expenses of 4,617 million not allocated to each reportable segment. Corporate expenses refer to the expenses at the head office organizations, such as general affairs and accounting divisions that do not belong to those reportable segments, as well as research and development expenses. 2. The adjusted amount of segment assets (property, plant and equipment) includes corporate assets of 6,340 million not allocated to each reportable segment. Corporate assets refer to the assets at the head office organizations, such as general affairs and accounting divisions that do not belong to those reportable segments, as well as some welfare facilities. 4. Matters Concerning Changes in Reportable Segments, etc. (Change in the Method for Translating the Income and Expenses of Overseas Subsidiaries into Japanese Yen) As stated in Change in the Method for Translating the Income and Expenses of Overseas Subsidiaries into Japanese Yen of Changes in Accounting Policies, this change to accounting policy of the fiscal year ended March 31, was retrospectively applied and segment income for the previous fiscal year shows segment income after retrospective application. As a result, segment income for the previous fiscal year decreased by 23 million for Pigments business, by 57 million for Prepared colors and Chemicals business, and by 171 million for Polymers business, while it increased by 59 million for Printing Inks business and by 8 million for Other business compared with before the retrospective application. 23